Dare: Prioritise fiscal management by plugging leakages

The govt has raised its statutory debt ceiling to 65% of GDP to fund the record RM332b allocation for Budget 2022


MALAYSIA must address fiscal management concerns immediately, particularly tax revenue leakages, to achieve sustainable economic growth and avoid debt dependency.

According to think tank Datametrics Research and Information Sdn Bhd (Dare) MD Pankaj Kumar (picture), the government has raised its statutory debt ceiling to 65% of GDP to fund the record RM332.1 billion allocation for Budget 2022.

“This ceiling is expected to be sustained in the future given the government’s projected RM400 billion development expenditure for the 12th Malaysia Plan to take the national economy to the next level.

“While government spending of this scale and breadth is both necessary and timely in view of the devastation brought about by the Covid-19 pandemic, we cannot afford to be perpetually dependent on funding growth by going deeper into debt,” he said recently.

Pankaj also contended that it is now more important than ever for the government to keep a close eye on spending while plugging revenue leakages like the RM300 billion shadow economy, which costs the government at least RM33 billion in uncollected taxes each year.

“Last year’s Budget 2021 announced bold measures to curtail the illicit tobacco trade, which cost the government RM5 billion in uncollected tax losses a year.

“Laws curtailing transhipment and banning the use of small boats to export or import tobacco products have worked to bring down the level of illicit cigarettes for the first time since 2015.

“While Budget 2022 did not reveal any concrete steps to combat the shadow economy, a moratorium on sin tax excise is a wise decision to ensure that criminal gangs are not mistakenly awarded,” he said.

He added that as borders are opened and inter-state travel is reintroduced, the government, through its law enforcement agencies, must be even more careful in regulating black market activity, such as illicit tobacco traffic, which is projected to grow as a result of many households’ income crunch.

Additionally, Dare’s Winning The War on Tobacco Black Market report, which was released in October 2021, emphasised the necessity to combat illicit entry at numerous landing places along the nation’s coastline boundaries.

As a result, enforcement agencies such as customs and the navy must work together to combat the trade.

Apart from that, the report also suggests that Malaysia take action to remove corrupt practices that have hampered the country’s ability to compete.

“Not only will this assist to strengthen the country’s international position, but it will also help combat illicit market transactions,” Pankaj concluded.